Over the past eight days, U.S.-based Bitcoin ETFs have been hit with serious outflows totaling $1.2 billion. While this trend aligns with a typical September downturn in crypto prices, some analysts are still optimistic about BTC’s next move. On the other hand, Jim Bianco is unhappy about the very slow adoption of Bitcoin ETFs. Meanwhile, interest in crypto remains strong, even as ownership rates have fallen according to a recent Federal Reserve report. .
Rektember Strikes Bitcoin ETFs
Over the past eight days, U.S.-based spot Bitcoin exchange-traded funds (ETFs) have been hit with consecutive outflows. In fact, investors withdrew a combined $1.2 billion from these ETFs over this time.
This is the longest period of net outflows since their launch in January, according to Bloomberg. Between Aug. 30 and Sept. 6, these 11 listed spot Bitcoin ETFs saw a steady decline in investments, which correlated with a sharp drop in Bitcoin's price. The crypto's price fell from a high of $64,668 on Aug. 26 to a low of $53,491 by Sept. 7. This is a 17.28% decrease in just two weeks.
Bitcoin ETF flow (Source: Farside Investors)
This downturn in Bitcoin’s price aligns with a broader trend that is usually seen in September, which is referred to as “Rektember,” where digital assets typically face big losses before potentially recovering in October during “Uptober.” Despite Bitcoin's weak performance at the beginning of the month, there are still a few analysts who are cautiously optimistic about BTC’s potential rebound soon.
Financial adviser Suze Orman recently shared her long-term belief in Bitcoin during an interview, and stated that BTC remains an essential asset for investors. Orman also suggested that younger generations will turn to Bitcoin as a key investment as they mature, which will potentially drive the price upward.
Despite the outflows from Bitcoin ETFs, the crypto sector still dominates the ETF market in 2024. Data from The ETF Store shows that crypto-related funds, particularly Bitcoin-based ETFs, are among the most popular launches this year.
The four biggest ETF launches in 2024 are spot Bitcoin ETFs, including BlackRock’s iShares Bitcoin Trust, Fidelity’s Wise Origin Bitcoin Fund, ARK 21Shares Bitcoin ETF, and Bitwise’s Bitcoin ETF Trust. Of the top 25 ETF launches by inflows, 13 are linked to cryptocurrency, with 10 focused on Bitcoin and three on Ethereum.
The iShares Ethereum Trust ETF has also made some waves by surpassing the $1 billion mark in inflows in August.
Bitcoin ETFs Need Time to Mature
The Bitcoin ETFs that launched in the United States earlier this year may need more time before they become widely adopted, according to Jim Bianco, the CEO of Bianco Research. In a post on Sept. 8, Bianco shared his disappointment with the performance of spot Bitcoin ETFs since their launch in January. He believes they have not lived up to pre-approval expectations.
He pointed towards recent outflows, losses by holders, and a lack of any serious institutional investment as signs that the market is still in its early stages. Bianco also criticized the idea that simply launching Bitcoin ETFs would attract a large number of investors, and stated that the first eight months of trading have shown that the anticipated rush of investors did not really materialize.
Additionally, Bianco revealed that a lot of the ETF inflows have come from on-chain holders returning to traditional financial accounts, with little new money entering the crypto space. He speculates that more time, technological developments, and perhaps another Bitcoin halving in 2028 will be needed before the market can actually reach its full potential.
However, not all analysts share Bianco’s outlook. Bloomberg’s senior ETF analyst, Eric Balchunas, pointed out that Bitcoin ETFs already manage billions in assets after just eight months. He questioned Bianco’s assessment, especially as BlackRock’s iShares Bitcoin Trust (IBIT) alone has seen over $20 billion in inflows, while Fidelity’s Wise Origin Bitcoin Fund (FBTC) has attracted close to $10 billion. ARK 21Shares' Bitcoin ETF and Bitwise's Bitcoin ETF Trust have each attracted around $2 billion in net inflows to date.
Crypto analyst Bryan Ross also disagreed with Bianco, and argued that the lack of institutional trades in the current ETF market could mean that institutions still have to enter in force. He also believes that when institutional investors do join, the market could experience a big surge in inflows driven by fear of missing out (FOMO) and renewed interest in Bitcoin.
El Salvador's Bitcoin Strategy Yields Impressive Profit
Meanwhile, El Salvador is celebrating its third anniversary since adopting Bitcoin as legal tender. On Sept. 7 of 2021, El Salvador became the first nation in the world to make Bitcoin a legal currency, which was a bold decision championed by President Nayib Bukele. The goal of the move was to enhance remittance payments and attract financial innovation to position El Salvador as a digital asset pioneer.
According to Alex Momot, the CEO of Peanut Trade, while it’s too early to declare the experiment a complete success, El Salvador has already seen tangible benefits.
As part of its Bitcoin strategy, El Salvador has been dollar-cost averaging into the cryptocurrency by buying one Bitcoin per day since 2021. This strategy has paid off, as the country now holds more than $31 million in profit from its Bitcoin investments. The average purchase price of El Salvador’s Bitcoin holdings is $43,877 per Bitcoin, and BTC currently trades at around $55,309.47.
Despite the initial backlash and criticism, El Salvador’s Bitcoin holdings are now very profitable. The country holds a total of 5,865 Bitcoin, which is worth more than $314 million, according to its treasury.
Although some expected other countries to follow El Salvador’s lead, only the Central African Republic has adopted Bitcoin as legal tender since. Major economies have been a bit hesitant, mainly due to their dependence on relationships with international creditors who oppose these kinds of moves. Larger countries are unlikely to take the same risks, according to Momot. However, despite pressure from institutions like the International Monetary Fund, El Salvador has stood firm in its decision.
The success of Bitcoin in El Salvador has paved the way for further institutional adoption in other regions. Countries like Brazil have also expressed interest in developing a legal framework for Bitcoin, but no concrete regulations have been established just yet.
Crypto Ownership Falling
Although some analysts believe things are looking up for Bitcoin and other cryptos, a recent report from the United States Federal Reserve reveals that cryptocurrency ownership has not grown in line with the market's recent recovery. According to the Consumer Finance Institute (CFI) of the Federal Reserve Bank of Philadelphia, data collected from surveys between January of 2022 and July of 2024 shows that while the crypto market has surged, ownership rates have declined.
The CFI used Bitcoin prices as a reference to track the market’s performance. The lowest point of the crypto winter was in late 2022. During this period, crypto ownership dropped from 24.6% of the surveyed population in January 2022 to 19.1% in October of 2022.
Bitcoin price compared to crypto ownership (Source: Federal Bank of Philadelphia)
Despite a market recovery over the next 18 months, ownership did not increase. By October 2023, ownership had fallen further to 17.1%, and by January of 2024, it stood at 15.4%. Even during Bitcoin’s price peak in March and its halving event in April, ownership rates barely moved, with just 14.7% of respondents owning crypto in July 2024.
While ownership rates have continued to decline, the Fed’s researchers did notice an increase in the number of respondents expressing interest in purchasing cryptocurrency. During the 2022 bear market, interest in buying crypto fell from 18.8% to 10.6%, but by April of 2024, that number rebounded to 21.8%. This suggests a growing future interest despite the current ownership decline.
People likely to buy crypto in the future (Source: Federal Bank of Philadelphia)
The CFI gathered its data through two web-based surveys that each targeted 5,000 nationally representative respondents.
